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S.B. 118

             1     

INDIVIDUAL INCOME TAX - ADOPTION

             2     
EXPENSES

             3     
2003 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Sponsor: Carlene M. Walker

             6      This act modifies the Individual Income Tax Act to allow an individual to choose from
             7      specified options the taxable year for which the individual may subtract adoption
             8      expenses from federal taxable income. This act has retrospective operation for taxable
             9      years beginning on or after January 1, 2003.
             10      This act affects sections of Utah Code Annotated 1953 as follows:
             11      AMENDS:
             12          59-10-103, as last amended by Chapter 257, Laws of Utah 2000
             13          59-10-114, as last amended by Chapter 211, Laws of Utah 2002
             14          59-10-133, as enacted by Chapter 327, Laws of Utah 2001
             15      Be it enacted by the Legislature of the state of Utah:
             16          Section 1. Section 59-10-103 is amended to read:
             17           59-10-103. Definitions.
             18          (1) As used in this chapter:
             19          (a) "Adoption expenses" means:
             20          (i) any actual medical and hospital expenses of the mother of the adopted child which
             21      are incident to the child's birth;
             22          (ii) any welfare agency fees or costs;
             23          (iii) any child placement service fees or costs;
             24          (iv) any legal fees or costs; or
             25          (v) any other fees or costs relating to an adoption.
             26          [(a)] (b) "Adult with a disability" means an individual who:
             27          (i) is 18 years of age or older;



             28          (ii) is eligible for services under Title 62A, Chapter 5, Services to People with
             29      Disabilities; and
             30          (iii) is not enrolled in:
             31          (A) an education program for students with disabilities that is authorized under Section
             32      53A-15-301 ; or
             33          (B) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind.
             34          [(b)] (c) "Corporation" includes associations, joint stock companies, and insurance
             35      companies.
             36          [(c)] (d) "Dependent child with a disability" means an individual 21 years of age or
             37      younger who:
             38          (i) (A) is diagnosed by a school district representative under rules adopted by the State
             39      Board of Education as having a disability classified as:
             40          (I) autism;
             41          (II) deafness;
             42          (III) preschool developmental delay;
             43          (IV) dual sensory impairment;
             44          (V) hearing impairment;
             45          (VI) intellectual disability;
             46          (VII) multidisability;
             47          (VIII) orthopedic impairment;
             48          (IX) other health impairment;
             49          (X) traumatic brain injury; or
             50          (XI) visual impairment;
             51          (B) is not receiving residential services from:
             52          (I) the Division of Services for People with Disabilities created under Section
             53      62A-5-102 ; or
             54          (II) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind;
             55      and
             56          (C) is enrolled in:
             57          (I) an education program for students with disabilities that is authorized under Section
             58      53A-15-301 ; or



             59          (II) a school established under Title 53A, Chapter 25, Schools for the Deaf and Blind;
             60      or
             61          (ii) is identified under guidelines of the Department of Health as qualified for:
             62          (A) Early Intervention; or
             63          (B) Infant Development Services.
             64          [(d)] (e) "Employer," "employee," and "wages" are defined as provided in Section
             65      59-10-401 .
             66          [(e)] (f) "Fiduciary" means a guardian, trustee, executor, administrator, receiver,
             67      conservator, or any person acting in any fiduciary capacity for any individual.
             68          [(f)] (g) "Homesteaded land diminished from the Uintah and Ouray Reservation"
             69      means the homesteaded land that was held to have been diminished from the Uintah and Ouray
             70      Reservation in Hagen v. Utah, 510 U.S. 399 (1994).
             71          [(g)] (h) "Individual" means a natural person and includes aliens and minors.
             72          [(h)] (i) "Nonresident individual" means an individual who is not a resident of this
             73      state.
             74          [(i)] (j) "Nonresident trust" or "nonresident estate" means a trust or estate which is not
             75      a resident estate or trust.
             76          [(j)] (k) (i) "Partnership" includes a syndicate, group, pool, joint venture, or other
             77      unincorporated organization, through or by means of which any business, financial operation,
             78      or venture is carried on, and which is not, within the meaning of this chapter, a trust or estate or
             79      a corporation.
             80          (ii) "Partnership" does not include any organization not included under the definition of
             81      "partnership" contained in Section 761, Internal Revenue Code.
             82          (iii) "Partner" includes a member in such a syndicate, group, pool, joint venture, or
             83      organization.
             84          [(k)] (l) "Resident individual" means:
             85          (i) an individual who is domiciled in this state for any period of time during the taxable
             86      year, but only for the duration of such period; or
             87          (ii) an individual who is not domiciled in this state but maintains a permanent place of
             88      abode in this state and spends in the aggregate 183 or more days of the taxable year in this
             89      state. For purposes of this Subsection (1)[(k)](l)(ii), a fraction of a calendar day shall be


             90      counted as a whole day.
             91          [(l)] (m) (i) "Resident estate" or "resident trust" means:
             92          (A) an estate of a decedent who at his death was domiciled in this state;
             93          (B) a trust, or a portion of a trust, consisting of property transferred by will of a
             94      decedent who at his death was domiciled in this state; or
             95          (C) a trust administered in this state.
             96          (ii) For purposes of this chapter, a trust shall be considered to be administered in this
             97      state if:
             98          (A) the place of business where the fiduciary transacts a major portion of its
             99      administration of the trust is in this state; or
             100          (B) the usual place of business of the fiduciary is in this state.
             101          (iii) Where there are two or more fiduciaries, the residency status of the trust shall be
             102      determined by the situs of the corporate or professional fiduciary with primary responsibility
             103      for the administration of the trust as defined in the trust instrument.
             104          (iv) The commission may, by rule, provide additional guidelines to determine the
             105      residency status of a trust.
             106          [(m)] (n) "Taxable income" and "state taxable income" are defined as provided in
             107      Sections 59-10-111 , 59-10-112 , 59-10-116 , 59-10-201.1 , and 59-10-204 .
             108          [(n)] (o) "Taxpayer" means any individual, estate, or trust or beneficiary of an estate or
             109      trust, whose income is subject in whole or part to the tax imposed by this chapter.
             110          [(o)] (p) "Uintah and Ouray Reservation" means the lands recognized as being included
             111      within the Uintah and Ouray Reservation in:
             112          (i) Hagen v. Utah, 510 U.S. 399 (1994); and
             113          (ii) Ute Indian Tribe v. Utah, 114 F.3d 1513 (10th Cir. 1997).
             114          [(p)] (q) "Ute tribal member" means a person who is enrolled as a member of the Ute
             115      Indian Tribe of the Uintah and Ouray Reservation.
             116          [(q)] (r) "Ute tribe" means the Ute Indian Tribe of the Uintah and Ouray Reservation.
             117          (2) Any term used in this chapter has the same meaning as when used in comparable
             118      context in the laws of the United States relating to federal income taxes unless a different
             119      meaning is clearly required. Any reference to the Internal Revenue Code or to the laws of the
             120      United States shall mean the Internal Revenue Code or other provisions of the laws of the


             121      United States relating to federal income taxes which are in effect for the taxable year. Any
             122      reference to a specific section of the Internal Revenue Code or other provision of the laws of
             123      the United States relating to federal income taxes shall include any corresponding or
             124      comparable provisions of the Internal Revenue Code as hereafter amended, redesignated, or
             125      reenacted.
             126          Section 2. Section 59-10-114 is amended to read:
             127           59-10-114. Additions to and subtractions from federal taxable income of an
             128      individual.
             129          (1) There shall be added to federal taxable income of a resident or nonresident
             130      individual:
             131          (a) the amount of any income tax imposed by this or any predecessor Utah individual
             132      income tax law and the amount of any income tax imposed by the laws of another state, the
             133      District of Columbia, or a possession of the United States, to the extent deducted from federal
             134      adjusted gross income, as defined by Section 62, Internal Revenue Code, in determining federal
             135      taxable income;
             136          (b) a lump sum distribution that the taxpayer does not include in adjusted gross income
             137      on the taxpayer's federal individual income tax return for the taxable year;
             138          (c) for taxable years beginning on or after January 1, 2002, the amount of a child's
             139      income calculated under Subsection (5) that:
             140          (i) a parent elects to report on the parent's federal individual income tax return for the
             141      taxable year; and
             142          (ii) the parent does not include in adjusted gross income on the parent's federal
             143      individual income tax return for the taxable year;
             144          (d) 25% of the personal exemptions, as defined and calculated in the Internal Revenue
             145      Code;
             146          (e) a withdrawal from a medical care savings account and any penalty imposed in the
             147      taxable year if:
             148          (i) the taxpayer did not deduct or include the amounts on his federal tax return pursuant
             149      to Section 220, Internal Revenue Code; and
             150          (ii) the withdrawal is subject to Subsections 31A-32a-105 (1) and (2);
             151          (f) the amount refunded to a participant under Title 53B, Chapter 8a, Higher Education


             152      Savings Incentive Program, in the year in which the amount is refunded; and
             153          (g) except as provided in Subsection (6), for taxable years beginning on or after
             154      January 1, 2003, for bonds, notes, and other evidences of indebtedness acquired on or after
             155      January 1, 2003, the interest from bonds, notes, and other evidences of indebtedness issued by
             156      one or more of the following entities:
             157          (i) a state other than this state;
             158          (ii) the District of Columbia;
             159          (iii) a political subdivision of a state other than this state; or
             160          (iv) an agency or instrumentality of an entity described in Subsections (1)(g)(i) through
             161      (iii).
             162          (2) There shall be subtracted from federal taxable income of a resident or nonresident
             163      individual:
             164          (a) the interest or dividends on obligations or securities of the United States and its
             165      possessions or of any authority, commission, or instrumentality of the United States, to the
             166      extent includable in gross income for federal income tax purposes but exempt from state
             167      income taxes under the laws of the United States, but the amount subtracted under this
             168      Subsection (2)(a) shall be reduced by any interest on indebtedness incurred or continued to
             169      purchase or carry the obligations or securities described in this Subsection (2)(a), and by any
             170      expenses incurred in the production of interest or dividend income described in this Subsection
             171      (2)(a) to the extent that such expenses, including amortizable bond premiums, are deductible in
             172      determining federal taxable income;
             173          (b) (i) except as provided in Subsection (2)(b)(ii), 1/2 of the net amount of any income
             174      tax paid or payable to the United States after all allowable credits, as reported on the United
             175      States individual income tax return of the taxpayer for the same taxable year; and
             176          (ii) notwithstanding Subsection (2)(b)(i), for taxable years beginning on or after
             177      January 1, 2001, the amount of a credit or an advance refund amount reported on a resident or
             178      nonresident individual's United States individual income tax return allowed as a result of the
             179      acceleration of the income tax rate bracket benefit for 2001 in accordance with Section 101,
             180      Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. No. 107-16, may not be
             181      used in calculating the amount described in Subsection (2)(b)(i);
             182          (c) the amount of adoption expenses [which, for purposes of this Subsection (2)(c),


             183      means any actual medical and hospital expenses of the mother of the adopted child which are
             184      incident to the child's birth and any welfare agency, child placement service, legal, and other
             185      fees or costs relating to the adoption;] for one of the following taxable years as elected by the
             186      resident or nonresident individual:
             187          (i) regardless of whether a court issues an order granting the adoption, the taxable year
             188      in which the adoption expenses are:
             189          (A) paid; or
             190          (B) incurred;
             191          (ii) the taxable year in which a court issues an order granting the adoption; or
             192          (iii) any year in which the resident or nonresident individual may claim the federal
             193      adoption expenses credit under Section 23, Internal Revenue Code;
             194          (d) amounts received by taxpayers under age 65 as retirement income which, for
             195      purposes of this section, means pensions and annuities, paid from an annuity contract
             196      purchased by an employer under a plan which meets the requirements of Section 404(a)(2),
             197      Internal Revenue Code, or purchased by an employee under a plan which meets the
             198      requirements of Section 408, Internal Revenue Code, or paid by the United States, a state, or
             199      political subdivision thereof, or the District of Columbia, to the employee involved or the
             200      surviving spouse;
             201          (e) for each taxpayer age 65 or over before the close of the taxable year, a $7,500
             202      personal retirement exemption;
             203          (f) 75% of the amount of the personal exemption, as defined and calculated in the
             204      Internal Revenue Code, for each dependent child with a disability and adult with a disability
             205      who is claimed as a dependent on a taxpayer's return;
             206          (g) any amount included in federal taxable income that was received pursuant to any
             207      federal law enacted in 1988 to provide reparation payments, as damages for human suffering,
             208      to United States citizens and resident aliens of Japanese ancestry who were interned during
             209      World War II;
             210          (h) subject to the limitations of Subsection (3)(e), amounts a taxpayer pays during the
             211      taxable year for health care insurance, as defined in Title 31A, Chapter 1, General Provisions:
             212          (i) for:
             213          (A) the taxpayer;


             214          (B) the taxpayer's spouse; and
             215          (C) the taxpayer's dependents; and
             216          (ii) to the extent the taxpayer does not deduct the amounts under Section 125, 162, or
             217      213, Internal Revenue Code, in determining federal taxable income for the taxable year;
             218          (i) (i) except as otherwise provided in this Subsection (2)(i), the amount of a
             219      contribution made during the taxable year on behalf of the taxpayer to a medical care savings
             220      account and interest earned on a contribution to a medical care savings account established
             221      pursuant to Title 31A, Chapter 32a, Medical Care Savings Account Act, to the extent the
             222      contribution is accepted by the account administrator as provided in the Medical Care Savings
             223      Account Act, and if the taxpayer did not deduct or include amounts on the taxpayer's federal
             224      individual income tax return pursuant to Section 220, Internal Revenue Code; and
             225          (ii) a contribution deductible under this Subsection (2)(i) may not exceed either of the
             226      following:
             227          (A) the maximum contribution allowed under the Medical Care Savings Account Act
             228      for the tax year multiplied by two for taxpayers who file a joint return, if neither spouse is
             229      covered by health care insurance as defined in Section 31A-1-301 or self-funded plan that
             230      covers the other spouse, and each spouse has a medical care savings account; or
             231          (B) the maximum contribution allowed under the Medical Care Savings Account Act
             232      for the tax year for taxpayers:
             233          (I) who do not file a joint return; or
             234          (II) who file a joint return, but do not qualify under Subsection (2)(i)(i)(A); and
             235          (j) the amount included in federal taxable income that was derived from money paid by
             236      the taxpayer to the program fund under Title 53B, Chapter 8a, Higher Education Savings
             237      Incentive Program, not to exceed amounts determined under Subsection 53B-8a-106 (1)(d), and
             238      investment income earned on participation agreements under Subsection 53B-8a-106 (1) that is
             239      included in federal taxable income, but only when the funds are used for qualified higher
             240      education costs of the beneficiary;
             241          (k) for taxable years beginning on or after January 1, 2000, any amounts paid for
             242      premiums for long-term care insurance as defined in Section 31A-1-301 to the extent the
             243      amounts paid for long-term care insurance were not deducted under Section 213, Internal
             244      Revenue Code, in determining federal taxable income; and


             245          (l) for taxable years beginning on or after January 1, 2000, if the conditions of
             246      Subsection (4)(a) are met, the amount of income derived by a Ute tribal member:
             247          (i) during a time period that the Ute tribal member resides on homesteaded land
             248      diminished from the Uintah and Ouray Reservation; and
             249          (ii) from a source within the Uintah and Ouray Reservation.
             250          (3) (a) For purposes of Subsection (2)(d), the amount of retirement income subtracted
             251      for taxpayers under 65 shall be the lesser of the amount included in federal taxable income, or
             252      $4,800, except that:
             253          (i) for married taxpayers filing joint returns, for each $1 of adjusted gross income
             254      earned over $32,000, the amount of the retirement income exemption that may be subtracted
             255      shall be reduced by 50 cents;
             256          (ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income
             257      earned over $16,000, the amount of the retirement income exemption that may be subtracted
             258      shall be reduced by 50 cents; and
             259          (iii) for individual taxpayers, for each $1 of adjusted gross income earned over
             260      $25,000, the amount of the retirement income exemption that may be subtracted shall be
             261      reduced by 50 cents.
             262          (b) For purposes of Subsection (2)(e), the amount of the personal retirement exemption
             263      shall be further reduced according to the following schedule:
             264          (i) for married taxpayers filing joint returns, for each $1 of adjusted gross income
             265      earned over $32,000, the amount of the personal retirement exemption shall be reduced by 50
             266      cents;
             267          (ii) for married taxpayers filing separate returns, for each $1 of adjusted gross income
             268      earned over $16,000, the amount of the personal retirement exemption shall be reduced by 50
             269      cents; and
             270          (iii) for individual taxpayers, for each $1 of adjusted gross income earned over
             271      $25,000, the amount of the personal retirement exemption shall be reduced by 50 cents.
             272          (c) For purposes of Subsections (3)(a) and (b), adjusted gross income shall be
             273      calculated by adding to federal adjusted gross income any interest income not otherwise
             274      included in federal adjusted gross income.
             275          (d) For purposes of determining ownership of items of retirement income common law


             276      doctrine will be applied in all cases even though some items may have originated from service
             277      or investments in a community property state. Amounts received by the spouse of a living
             278      retiree because of the retiree's having been employed in a community property state are not
             279      deductible as retirement income of such spouse.
             280          (e) For purposes of Subsection (2)(h), a subtraction for an amount paid for health care
             281      insurance as defined in Title 31A, Chapter 1, General Provisions, is not allowed:
             282          (i) for an amount that is reimbursed or funded in whole or in part by the federal
             283      government, the state, or an agency or instrumentality of the federal government or the state;
             284      and
             285          (ii) for a taxpayer who is eligible to participate in a health plan maintained and funded
             286      in whole or in part by the taxpayer's employer or the taxpayer's spouse's employer.
             287          (4) (a) A subtraction for an amount described in Subsection (2)(l) is allowed only if:
             288          (i) the taxpayer is a Ute tribal member; and
             289          (ii) the governor and the Ute tribe execute and maintain an agreement meeting the
             290      requirements of this Subsection (4).
             291          (b) The agreement described in Subsection (4)(a):
             292          (i) may not:
             293          (A) authorize the state to impose a tax in addition to a tax imposed under this chapter;
             294          (B) provide a subtraction under this section greater than or different from the
             295      subtraction described in Subsection (2)(l); or
             296          (C) affect the power of the state to establish rates of taxation; and
             297          (ii) shall:
             298          (A) provide for the implementation of the subtraction described in Subsection (2)(l);
             299          (B) be in writing;
             300          (C) be signed by:
             301          (I) the governor; and
             302          (II) the chair of the Business Committee of the Ute tribe;
             303          (D) be conditioned on obtaining any approval required by federal law; and
             304          (E) state the effective date of the agreement.
             305          (c) (i) The governor shall report to the commission by no later than February 1 of each
             306      year regarding whether or not an agreement meeting the requirements of this Subsection (4) is


             307      in effect.
             308          (ii) If an agreement meeting the requirements of this Subsection (4) is terminated, the
             309      subtraction permitted under Subsection (2)(l) is not allowed for taxable years beginning on or
             310      after the January 1 following the termination of the agreement.
             311          (d) For purposes of Subsection (2)(l) and in accordance with Title 63, Chapter 46a,
             312      Utah Administrative Rulemaking Act, the commission may make rules:
             313          (i) for determining whether income is derived from a source within the Uintah and
             314      Ouray Reservation; and
             315          (ii) that are substantially similar to how federal adjusted gross income derived from
             316      Utah sources is determined under Section 59-10-117 .
             317          (5) (a) For purposes of this Subsection (5), "Form 8814" means:
             318          (i) the federal individual income tax Form 8814, Parents' Election To Report Child's
             319      Interest and Dividends; or
             320          (ii) (A) for taxable years beginning on or after January 1, 2002, a form designated by
             321      the commission in accordance with Subsection (5)(a)(ii)(B) as being substantially similar to
             322      2000 Form 8814 if for purposes of federal individual income taxes the information contained
             323      on 2000 Form 8814 is reported on a form other than Form 8814; and
             324          (B) for purposes of Subsection (5)(a)(ii)(A) and in accordance with Title 63, Chapter
             325      46a, Utah Administrative Rulemaking Act, the commission may make rules designating a form
             326      as being substantially similar to 2000 Form 8814 if for purposes of federal individual income
             327      taxes the information contained on 2000 Form 8814 is reported on a form other than Form
             328      8814.
             329          (b) The amount of a child's income added to adjusted gross income under Subsection
             330      (1)(c) is equal to the difference between:
             331          (i) the lesser of:
             332          (A) the base amount specified on Form 8814; and
             333          (B) the sum of the following reported on Form 8814:
             334          (I) the child's taxable interest;
             335          (II) the child's ordinary dividends; and
             336          (III) the child's capital gain distributions; and
             337          (ii) the amount not taxed that is specified on Form 8814.


             338          (6) Notwithstanding Subsection (1)(g), interest from bonds, notes, and other evidences
             339      of indebtedness issued by an entity described in Subsections (1)(g)(i) through (iv) may not be
             340      added to federal taxable income of a resident or nonresident individual if, as annually
             341      determined by the commission:
             342          (a) for an entity described in Subsection (1)(g)(i) or (ii), the entity and all of the
             343      political subdivisions, agencies, or instrumentalities of the entity do not impose a tax based on
             344      income on any part of the bonds, notes, and other evidences of indebtedness of this state; or
             345          (b) for an entity described in Subsection (1)(g)(iii) or (iv), the following do not impose
             346      a tax based on income on any part of the bonds, notes, and other evidences of indebtedness of
             347      this state:
             348          (i) the entity; or
             349          (ii) (A) the state in which the entity is located; or
             350          (B) the District of Columbia, if the entity is located within the District of Columbia.
             351          Section 3. Section 59-10-133 is amended to read:
             352           59-10-133. Tax credits for special needs adoptions.
             353          (1) For purposes of this section, a "child who has a special need" means a child:
             354          (a) for whom permanent custody has been awarded to the Utah Division of Child and
             355      Family Services[,];
             356          (b) who cannot or should not be returned to the home of the child's biological
             357      parents[,]; and
             358          (c) who meets at least one of the following conditions:
             359          [(a)] (i) the child is five years of age or older;
             360          [(b)] (ii) the child is under the age of 18 with a physical, emotional, or mental
             361      disability; or
             362          [(c)] (iii) the child is a member of a sibling group placed together for adoption.
             363          (2) For taxable years beginning on or after January 1, 2001, a taxpayer who adopts a
             364      child who has a special need may claim on the taxpayer's individual income tax return for the
             365      taxable year a refundable credit of $1,000 against taxes otherwise due under this chapter for:
             366          (a) adoptions for which a court issues an order granting the adoption on or after
             367      January 1, 2001;
             368          (b) the taxable year during which a court issues an order granting the adoption; and


             369          (c) each child who has a special need whom the taxpayer adopts.
             370          (3) The credit provided for in this section may not be carried forward or carried back.
             371          (4) Nothing in this section shall affect the ability of any taxpayer who adopts a child
             372      who has a special need to receive [financial aid for] adoption [expenses] assistance under
             373      Section [ 62A-4a-108 ] 62A-4a-907 .
             374          Section 4. Retrospective operation.
             375          This act has retrospective operation for taxable years beginning on or after January 1,
             376      2003.




Legislative Review Note
    as of 1-15-03 9:24 AM


A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel


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